Larkspur Company leases an automobile with a fair value of $15,761 from Paul Motors, Inc., on the following terms. Non - cancelable term of 50 months. Rental of $330 per month (at the beginning of each month). (The present value at 0.5% per month is $14, 640.) Larkspur guarantees a residual value of $1,020 (the present value at 0.5% per month is $ 795). Larkspur expects the probable residual value to be $1,020 at the end of the lease term. Estimated economic life of the automobile is 60 months. Larkspur's incremental borrowing rate is 6% a year (0.50% a month). Paul's implicit rate is unknown. Your answer is incorrect. What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e. g. 5, 275.) Present value of the lease payments S

Larkspur Company leases an automobile with a fair value of $15,761 from Paul Motors, Inc., on the following terms. Non - cancelable term of 50 months. Rental of $330 per month (at the beginning of each month). (The present value at 0.5% per month is $14, 640.) Larkspur guarantees a residual value of $1,020 (the present value at 0.5% per month is $ 795). Larkspur expects the probable residual value to be $1,020 at the end of the lease term. Estimated economic life of the automobile is 60 months. Larkspur's incremental borrowing rate is 6% a year (0.50% a month). Paul's implicit rate is unknown. Your answer is incorrect. What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e. g. 5, 275.) Present value of the lease payments S

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

A-3

Larkspur Company leases an automobile with a fair value of $15, 761 from Paul Motors, Inc.,
on the following terms. Non - cancelable term of 50 months. Rental of $330 per month (at
the beginning of each month). (The present value at 0.5% per month is $14, 640.)
Larkspur guarantees a residual value of $1,020 (the present value at 0.5% per month is $
795). Larkspur expects the probable residual value to be $1,020 at the end of the lease
term. Estimated economic life of the automobile is 60 months. Larkspur's incremental
borrowing rate is 6% a year (0.50% a month). Paul's implicit rate is unknown. Your answer
is incorrect. What is the present value of the lease payments to determine the lease liability?
(Round answer to 0 decimal places, e. g. 5,275.) Present value of the lease payments S

Your answer is incorrect.
What is the present value of the lease payments to determine the lease liability? (Round answer to 0 decimal places, e.g. 5,275.)
Present value of the lease payments
$

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